www.Hertitage.org

In his Tuesday State of the Union address, President Barack Obama said Americans must "understand [that] if we don’t take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery—all of which would have an even worse effect on our job growth and family incomes." This is all true. But then in a total failure of leadership, President Obama went on to completely abandon his own deficit commission’s spending cut proposals.

Today, the Congressional Budget Office (CBO) confirmed that our nation simply can’t afford President Obama’s failed leadership for much longer. This new CBO 10-year budget baseline shows an unprecedented $1.5 trillion deficit for this fiscal year—an increase of $95 billion over their last estimate. This will be the third consecutive year of trillion-dollar deficits.

And the reality is even worse than the CBO report suggests. By law, the CBO is forced to make a number of unrealistic assumptions about federal spending and taxes, including that (1) the 2001 and 2003 tax cuts will expire, (2) the Alternative Minimum Tax will not be annually adjusted for inflation, and (3) non-war discretionary spending will grow no faster than inflation through 2021.

The Heritage Foundation’s Brian Riedl has constructed a more realistic baseline that fixes the distortions mentioned above, and the results are scary. First, the federal government will add an astonishing $19.1 trillion in new debt between 2009 and 2021—$140,000 per household over those 13 years. Annual budget deficits will never drop below $1 trillion, as the debt is now projected to reach 100 percent of the gross domestic product (GDP) by 2020.

Second, these eternal trillion-dollar deficits are being entirely driven by rising government spending. By 2018, recession-depleted tax revenues are scheduled to rebound to their historic average of 18 percent of GDP. By contrast, federal spending (historically 20.3 percent of GDP) is projected to reach 26.4 percent of GDP by 2021.

In just four years (2007 through 2011), the federal budget is set to have expanded by nearly $1 trillion, from $2.729 trillion to $3.708 trillion. This represents a 36 percent expansion of government. The new Congress has already begun force the Obama Administration to make some responsible discretionary spending cuts. And these will help. Discretionary spending increased 25 percent between 2007 and 2010—not counting the $311 billion in discretionary stimulus spending and approximately $170 billion in annual spending on the global war against terrorism. Forcing President Obama and his Progressives allies to reverse this trend is a necessary first step.

But it will not be enough. Much of this spending growth will be driven by entitlements such as Social Security, Medicare, and Medicaid. Between 2008 and 2021, the annual cost of these three programs is set to rise from $1.2 trillion to $2.2 trillion. Thanks to Obamacare, Medicaid costs alone are projected to soar 129 percent faster than inflation over that period. Our nation will drown in debt unless serious reforms to long-term entitlements are made.

The Heritage Foundation has solutions for our entitlement crisis. First and foremost we must repeal Obamacare. But that is not enough. We must also transition away from Medicare’s inefficient price-controlled fee-for-service system into a new defined-contribution system. Medicaid’s long-term care benefit must be transformed from an open-ended entitlement to an insurance-based model of private coverage. And Social Security should be reformed into real insurance, focusing benefits on those who really need them during retirement while strengthening the safety net for poorer retirees.

Yesterday at The Heritage Foundation, House Majority Leader Eric Cantor spoke about the United States fall from the ranks of the economically "free" countries of the world as measured by the Index of Economic Freedom: "Today, I don’t hesitate to say that we have arrived at a critical moment in American history. We as a nation are at a crossroads. This year our overall score fell again, in large measure because of the increase in government spending." He is right. Which is why conservatives must lead on real solutions to end our entitlement crisis.

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QUICK HITS

• The unemployment rate rose in 20 states last month as employers in most states shed jobs.
• Last year, new-home sales fell to the lowest level in 47 years.
• Social Security ran a deficit last year, will run a deficit this year, and will continue running deficits forever, according to a new CBO report.
• While the Department of Health and Human Services more than tripled the number of Obamacare waivers to over 700 yesterday, Medicare Chief Actuary Richard Foster told the House Budget Committee that Obamacare will not hold health care costs down and will force people to change their health insurance.
• An Ohio mother was sentenced to 10 days in jail for sending her kids to a better school district.